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Funding Distribution to State Universities

Many Iowans are under the assumption that state funding to the state’s three public universities is distributed in a manner similar to K-12 funding, where the goal is to provide a similar level of support for each school child, regardless of the district they attend. But that is not how it works when it comes to the higher education of in-state students, and this situation is getting closer attention now from the Board of Regents.

Just how does Iowa provide its support for its three universities? According to Regents staff, quoted in a Jan. 24 Cedar Rapids Gazette article, the method used by the Board of Regents dates back at least to the end of World War II. The formula used appears to be relatively simple – a 40/40/20 split between the University of Iowa, Iowa State University and the University of Northern Iowa. Things are never as simple as they appear, and that certainly is the case when it comes to taxpayer support for in-state university students.

The chart below shows the FY 2014 General Aid appropriation for each university, as the Legislature approved it last year, and how much each school would have received if it was given its proportional share under the board’s formula:

As can be seen, the actual funding appears to not be in line with the board’s long-standing formula. The University of Iowa’s share is higher than what would be expected under a 40/40/20 split, while Iowa State and UNI are receiving less. The differences in the programs offered by each school may account for some of the variation in funding, but another factor is likely playing a significant role in causing the funding inequity.

While the Regents’ formula for distributing state funds has not changed in many years, the composition of the student bodies at Iowa and Iowa State has. Each of these schools has seen a major influx of out-of-state students over the years, while UNI has remained predominantly an in-state student school. The fall 2013 enrollment report, presented to the board at its December meeting, show the differences:

The fact that the Regents’ allocation formula for state aid has not adapted, as the composition of the student body has changed, has produced large variations in the funding per in-state student. In FY 2014, the University of Iowa is receiving $13,126 of General Aid from the state per in-state student, while Iowa State is receiving $8,765 per in-state student and UNI’s share is just $7,676 per in-state student. This situation is one of the factors in the concern over the funding levels for UNI.

Unlike previous members, the current Board of Regents has recognized that the existing funding formula is not working for Iowa’s three universities or Iowa taxpayers. Last year, the board established a task force led by former board president David Miles to examine how to bring the funding formula into the 21st century. The task force has already met three times, focusing much of its work on how other states use performance or outcome measures to set funding levels.

One of the states getting close attention from the work group is Tennessee. The Volunteer State has established a set of measures by which it allocates all of its funding to the network of state universities. The most predominant factor used in allocating funding is the total number of graduates. Tennessee has used this process for three years.

The Regents’ task force is expected to hear the ideas of the three university presidents at its next meeting. The work of the task force is to be completed by June, when it will present its recommendations to the Board of Regents. While any change would take several years to implement, the board is expecting to makes it proposal for changes to the governor this fall.